If all other variables remain constant, then an increase in the coupon rate will cause which of the following to also increase?
I. face value
II. market value
III. yield to maturity
IV. current yield

Question

Quizplus · Accepted Answer

An increase in the coupon rate increases the market value of the bond because it becomes more attractive to investors due to higher interest payments. This also increases the current yield, which is the annual coupon payment divided by the market price of the bond. However, the face value does not change as it is fixed at issuance, and the yield to maturity may decrease as the bond's price increases.

If All Other Variables Remain Constant, Then an Increase in the Coupon